Over-limit credit card fees axed by Discover and AmEx

08.11.09
By Sarah Beldo

These days, it seems the headlines are all about more - and higher - fees for the average consumer, pushing credit card debt higher and causing further financial stress.

So it may come as a surprise, and a breath of fresh air, to learn that both Discover Financial and American Express are doing away with their over-limit fees.

The fees, which are levied on customers who spend above their credit limit, are addressed in the Credit CARD legislation that takes effect in February. Although the law doesn't ban the charges altogether, it requires banks to give people the chance to opt in.

Now, it seems that Discover and AmEx have decided to scrap their fees ahead of the new legislation.

According to the New York Times, the decision to allow customers to over-spend their limit on certain occasions most likely has a financial basis.

In other words, the banks did a cost study and realized it would be more expensive to create a system to allow cardholders to opt in to breaching their spending limit than it would be to eliminate the charge altogether.

Although the move to ax credit card fees may seem like a situation in which the consumer wins, some experts recommend caution.

Marc Hedlund, CEO of personal finance site Wesabe, told USA Today that "taking away these fees could mean that others will show up in their place."

After all, many banks rely on these types of extra charges for a portion of their profits. In fact, AmEx has already said it will be increasing the purchase APR for some customers, USA Today reports.

With six months left before the Credit CARD law takes effect, it remains to be seen what other steps issuers will take to maximize profits without alienating their cardholders.

More Credit & Debt Articles | News Home | Discuss in our Forum

Discover and American Express are doing away with their over-limit fees.